Crisis UPDATE: Here is the latest news out of Ukraine
Vladimir Putin said he sees no immediate need to invade eastern Ukraine as the Obama administration prepares $1 billion in loan guarantees for the cash-strapped nation and threatens sanctions against Russia.
In his first public remarks since Russian forces took control of the Crimean peninsula in southern Ukraine, President Putin still reserved the right to use force to protect ethnic Russians. There’s “no such necessity” to do so at present, he said. Secretary of State John Kerry arrived in Kiev to present a financial aid package to the interim government, which needs as much as $15 billion in the coming years to stay afloat.
“Clearly Putin would like to lower some of the rhetoric,” Paul DeNoon, who oversees $29 billion of emerging-market debt at New York-based AllianceBernstein Holding LP, said today by phone. “But I don’t think he’s signaled a new direction in his intentions. We still think there’s a risk of escalation.”
Russia is tussling with the West for influence over Ukraine, which claims its former Soviet master deployed troops to block army bases and airports in Crimea after protests in Kiev deposed former president Viktor Yanukovych on Feb. 22. The U.S. and Europe are racing to seal billions of dollars of aid to help the new administration in Kiev avoid bankruptcy.
Russia is also staking its own claim, saying Ukraine owes state-controlled energy giant OAO Gazprom (GAZP) $2 billion.
Russia’s Micex stock index, which yesterday plunged 11 percent, reversed some of those losses and rose 5.2 percent today. The ruble strengthened 1.1 percent against the dollar-euro based used by the central bank, which unexpectedly raised its benchmark interest rate by 150 basis points to 7 percent yesterday.
Kerry is visiting Kiev to underscore U.S. support for the new Ukrainian government led by Prime Minister Arseniy Yatsenyuk and provide assistance to the fledgling administration.
U.S. officials traveling with him said sanctions such as travel and asset bans on Russian individuals and institutions are likely within days if Russia doesn’t de-escalate its actions in Ukraine and return its forces to barracks. They spoke on condition they not be named because the penalties aren’t finalized.
An International Monetary Fund delegation is also due in the Ukrainian capital today. Ukraine needs $15 billion in the next 2 1/2 years to stay afloat, Finance Minister Oleksandr Shlapak said March 1. Russia has halted an aid package of that size sealed with Yanukovych in December.
Putin claims extremists orchestrated a coup to dislodge Yanukovych and says Russian speakers in Ukraine’s east and south need protection. Ukraine’s acting President Oleksandr Turchynov has warned that a military invasion would be an act of war, saying Russians aren’t at risk.
Putin said troops stationed in Crimea, where Russia keeps its Black Sea fleet, have only been securing their bases. Russia has 16,000 troops in the Crimea region, while it’s permitted to have as many as 25,000, Vitaly Churkin, Russia’s ambassador to the United Nations, said yesterday.
“The use of the military is an extreme case,” Putin told reporters at his residence near Moscow today. “But we have a direct request from a legitimate president, Yanukovych, on military aid to protect Ukrainian citizens.”
Putin’s comments signal the crisis, the worst between Russia and the West since the Cold War ended, won’t immediately escalate. The standoff roiled markets as Russia held military exercises on Ukraine’s eastern border. The drills, which included fighter jets and tanks, ended today.
Ukraine’s hryvnia gained 6.7 percent to 9.1 per dollar, while the yield on the government’s dollar debt due 2023 fell 82 basis points to 9.738 percent, data compiled by Bloomberg show.
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